Although build-to-rent has been around for a few years now, in the grand world of real estate, it is still a relatively new concept, unless you are a property developer or a builder yourself. This brings us to the question, “What exactly is build-to-rent?”
The term build-to-rent is relatively self-explanatory, it defines any property that is developed with the sole intention to be rented out instead of being sold. Build-to-rent homes have gained wide popularity over the years and have been one of the most profitable real estate sectors since the last decade. Keep on reading to learn more about the history of build-to-rent.
What Year Did the Idea of Build-to-Rent Begin?
It was March 2009, the dying days of New Labor, when the first milestone of the build-to-rent projects took place. Inspired by the very successful and well-established multifamily sector, the Private Rented Sector Initiative (PRSI) was the first government exploration of the build-to-rent real estate sector.
Where Was the First Build-to-Rent Project?
Almost ten years ago, United States real estate investors bought millions of distressed properties, especially single-family homes, during the foreclosure crisis. They later renovated these homes, rented them out, or sold them for a profit. Hence the concept of building homes to rent came to birth.
The once small-scale, “mom-and-pop” single-family rental market was changed by large companies purchasing distressed houses into a corporation-like controlled asset class, and it has been expanding ever since.
Furthermore, in 2011, UK Investor, Delancey, purchased 50% stakes in the “Olympic Village” apartments in Stratford, London. What makes this investment stand out is the fact that during this time, investing in residential real estate, specifically build-to-rent homes, was not a thing. However, the recognition that Delancey got and the profits earned made build-to-rent one of the most lucrative and stable investment sectors in real estate.
What Were the Results?
Even after ten years, the build-to-rent real estate investment sector is now booming and rising more quickly than before. According to the National Association of Realtors, foreclosures—which made up 49% of all house sales in March 2009—now only account for 2% of sales. However, it got the build-to-rent sector much-needed awareness. As a result, real estate investors started coming up with new strategies to purchase homes and rent them out to convert them into a stable source of passive income.
This also made people realize that building homes and selling or renting them together on a large scale get investors several benefits. First of all, it is easier for a builder to construct a hundred homes together than to focus on building individual houses scattered throughout the city or state. Secondly, owning multiple homes in one place makes property management easier, more efficient, and less expensive.
Over the years, real estate investors have learned not only is build-to-rent an attractive and profitable investment but it also helps diversify your portfolio while guaranteeing valuable returns in the long run.
A Graph of US Build-to-Rent Projects Over the Years
Even though managing build-to-rent properties requires a lot of experience and resources, the profits make it worth your investment. With everyone looking for a home, especially Gen Z and Millenials, there is no better time to invest in the build-to-rent sector than now!